My 2023 Tax Loss Selling Recovery Portfolio has enjoyed a nice recovery since the June update, rising about 10.5%, and putting it back into positive territory since inception (up 6.2%). Of course, this comes with the benefit of the rising tide, which pushed the S&P 500 (up 5.5%) and Russell 2000 (up 6.8%) higher over the past five weeks.
The idea behind this annual pursuit is to identify potentially cheap names that were down sharply in in the prior year and might be pushed even lower at year-end as market participants book losses for tax purposes, but could recover in the New Year if selling pressure subsides. The objective is to outperform the S&P 500 and Russell 2000 indexes, and I've taken positions in all of the names.
Here are the criteria for inclusion:
- Down at least 30% year to date
- Forward price-to-earnings (P/E) ratios below 15 in the next two fiscal years
- Minimum market cap of $100 million
Tranche 1, released on 11/28, is up 51%, ahead of the S&P 500 (up 12%) and Russell 2000 (up 6%). Meta (META) (up 182%) remains the best overall performer, rising another 15% since the June update, and pushing past the $300 level for the first time since February 2022.
Ford (F) (up 12%) appears to be on the move, and is trading near a one-year high, after rising 21% over the past five weeks. While eBay (EBAY) (up 4%) broke into positive territory, Qualcomm (QCOM) (up 3%) has been treading water.
Tranche 2, released on 11/30, is down 10%, well behind both the S&P 500 (up 14%) and Russell 2000 (up 5%). While Kohl's (KSS) (down 18%) is still under water, it showed some signs of life, rising 23%.
MarineMax (HZO) (up 19%) broke back into positive territory on no news, and is trading at a 10-month high at less than 8x 2024 and 2025 consensus earnings estimates. Hanesbrands (HBI) (down 28%), stabilized, but remains a huge drag on the portfolio. Paramount Global (PARA) (down 11%) rose 9% since the June update, but now has an actors strike to grapple with.
Tranche 3, released 12/2, is down 23%, worse than the S&P 500 (up 11%) and Russell 2000 (up 4%), and was not a beneficiary of the rising tide. The only name here in positive territory is Wolverine Worldwide (WWW) (up 23%), which slipped a bit over the past month. Last week, the company temporarily amended its credit agreement to "enhance liquidity and financial flexibility" until the end of FY 2023.
Elanco Animal Health (ELAN) (down 19%) picked up 15% since the June update, and received some potentially good news after the market closed on Thursday. The EPA reviewed the company's Seresto flea and tick collar and confirmed its' registration. ELAN is up 11% in trading on Friday as I write this.
Vintage Wine Estates (VWE) (down 75%) remains the worst performer in the portfolio. Newell Brands (NWL) (down 20%) picked up some steam coming off of a 52-week low, and was the beneficiary of Cannacord initiating coverage of the stock with a $13 target.